Diamond & Specialty Minerals Summary for Nov. 11, 2024
2024-11-11 14:01 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score for Monday was a horrid 49-117-144 as the TSX Venture Exchange fell seven points to 601. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD) closed unchanged at 13 cents on 137,000 shares. The company rolled out its third quarter report last week, adding financial detail to the production and sales data it had revealed in mid-October. Therefore, there were few surprises in the latest report. Nevertheless, there were some eyebrow raisers lurking in the comments offered by Mr. Wall, president and chief executive officer.
While Mr. Wall offered the promoter's standard optimism about diamond prices, he braced investors to expect an otherwise lean 2025. Yes, the diamond market has been disappointing of late, he acknowledged, but he is "optimistic that the price environment will recover during 2025." Not so optimistically, he then added that 2025 will be "a period of planned production similar to 2024." And so, Mr. Wall and his crew are formally conceding that 2025 will be the second consecutive year with diamond production less than five million carats at its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories.
This will be no surprise to investors who took the time to peruse the company's 192-page technical report detailing the updated Gahcho Kue mine plan. The August document superseded a 2020 version that had casually called for 2024 production to fall to 4.7 million carats but rebound to 7.2 million carats in 2025. At that time, Mountain Province and its co-venturer, De Beers Canada, expected production from the Hearne pipe would end late last year and mining at 5034 would temporarily shrink in preparation for a final push in 2025, with the lost kimberlite to be replaced by lower-grade rock from the top of the Tuzo pit.
The usual delays slowed the schedule, but as 2024 approached, De Beers and Mountain Province began to fret about the impact of reduced production, prompting them to find alternate ways to boost the carat haul in the anticipated lean years. Yes, there is stockpiled kimberlite available, and yes, the co-venturers did smooth out their mine plan to a degree, but unfortunately, the main change was merely delaying the schedule by a year.
And so, the revised mine plan guidance for 2025 calls for 4.8 million carats of diamonds to be recovered from 1.7 million tonnes of 5034 kimberlite, 500,000 tonnes of Hearne kimberlite and 1.2 million tonnes of the lower-grade Tuzo material. Therefore, the plan projects the average grade for 2025 to be 1.39 carats per tonne, matching the forecast for this year.
Fortunately, Mountain Province and De Beers have been misers on the cost side of the profit equation. "The focus on operational efficiency and costs remains front of mind," Mr. Wall enthused, noting that the operational cost per tonne of ore treated, including capitalized stripping, is down significantly this year compared with a year ago. (The mine managed to cut its costs to $112 per tonne from the $142 per tonne achieved a year earlier.)
And so, Mr. Wall concedes that "2025 will be a period of continued cost and operational efficiency focus." Further, while he and his crew maintain their never-ending optimism for rough diamond prices, they are girding for a less cheerful possibility, concluding that "an assessment of the company's financing requirements in different diamond price environments" will be coming.
There is better news ahead, according to the mine plan: Gahcho Kue is still looking for that one last hurrah, when the revamped 5034 pit comes back into full-fledged production -- now slated for 2026. All 3.6 million tonnes of kimberlite sent to the plant that year will come from 5034, and it will grade a hefty 2.04 carats per tonne -- sufficient to yield 7.3 million carats.
And so, if diamond prices rebound as Mr. Wall and his crew expect -- or at least hope -- Mountain Province's coffers could be brimming by early 2027. Unfortunately, barring some major new find, the beginning of the end starts from there. The 5034 pipe will be finished for good early in 2027, leaving Tuzo as the only remaining pipe in production, so production in 2027 is expected to be just 4.3 million carats.
Yes, the mine will tap into the deeper and richer Tuzo kimberlite in subsequent years, and yes, the mine is projected to yield 6.3 million carats in 2028 and 7.3 million carats in 2029, but a significant part of the increase will be the result of lowering the diamond recovery cut-off to 0.8 millimetre from 1.1 millimetres. That move will boost the grade, of course, but it will reduce the average diamond price. More rejigging and new kimberlite entering the plan could of course improve 2027, but for now, padding 2025 is job one.